ATO data reveals almost a third of big companies still not paying tax in Australia

Almost a third of big companies are still not paying any tax despite a government crackdown that has included forcing technology multinationals to admit they do business in Australia, new data shows.

Taxation office deputy commissioner Rebecca Saint said the data, which covers 2,200 companies, showed good progress in cracking down on corporate tax evasion but more needed to be done.

“These are a good set of numbers,” she said.

She said the ATO wanted to improve voluntary compliance with tax law by big companies from 92% to 94%.

“We are still challenging corporates and ourselves to improve that voluntary compliance even further,” she said.

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The latest results, released on Thursday, show 32% of the companies in the data set paid no tax in the 2017-18 year – down from 36% three years previously.

About $3.8bn extra revenue was squeezed from foreign multinationals, partly as a result of the government’s crackdown on tech tax dodgers such as Google and Facebook – a strategy Saint said had locked in a flow of revenue into the future.

Tax receipts from the companies in the data sat were up $6.6bn in total, mainly due to soaring commodity prices.

Saint said the ATO was still focused on beefing up compliance at the top end of town and in the coming year would focus on problem areas including profit shifting by the local arms of multinationals that sell goods in Australia, related party finance deals that siphon cash away to offshore associates and intellectual property rorts.

It is the fifth year that the ATO has released data on the tax paid by big companies under legislation introduced by the former Labor government.

Under the law, the ATO publishes the revenue, taxable income and tax paid by public and foreign-owned companies with turnover of $100m or more and Australian private companies with turnover of $200m or more.

Australian private companies were initially to be treated in the same way as other companies but the threshold was increased by the Liberal government in late 2015 as part of a deal with the Greens.

Notable zero tax payers in the past have included Qantas and Pratt Consolidated Holdings, which is controlled by Australia’s richest man, Anthony Pratt.

About 12% of companies that made no contribution last year did so because they were working their way through losses carried forward after a bad year or series of bad years, which is allowed under the tax law.

This includes Qantas, which for the first time in a decade has incurred a substantial tax bill of more than $250m, according to the company’s tax transparency report for 2019.

Saint said that over the past five years some companies with no tax bill had moved from generating ongoing losses to eating away their accumulated losses.

“That tends to suggest to us that these companies are transitioning to a profitable state and should become tax payable in the future,” she said.

She said there were legitimate reasons why companies made losses.

“But there is also an element here that there are some taxpayers that also may have some legitimate business reason for not paying tax but that might be put together with some tax planning arrangements that they’ve entered in,” she said.

“Given the small number of taxpayers that sit in this population, we know every one of those ... we’re able to get in and undertake compliance action in terms of that tax planning position.

“We have seen that we’ve been able to bring those entities to a tax payable position much earlier than had the ATO not intervened.”

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She said that the ATO had the largest 100 companies in Australia under continuous review and expected to finish working its way through reviews of the top 1,000 next year.

“Profit shifting continues to be a key significant area of concern for us,” she said.

She said this included inbound supply chain rorts where local subsidiaries of multinational companies are charged over the odds for goods they sell in Australia, locking the profit away offshore.

The ATO is also continuing its focus on related party finance deals under which offshore companies in a multinational loan their Australian associates money at usurious rates, making sure little or no profit is made locally.

Enforcement action has focused on companies building billions of dollars worth of oil and gas projects – last year, Chevron paid the ATO $866m to settle an ATO lawsuit and in August the agency launched a $755m case against Shell.

Saint said the ATO was still looking at the marketing hubs in Singapore used by big miners, with legal action on foot against Glencore, and would shortly issue guidance on dealings with intellectual property.

The ATO is concerned about deals in which Australian companies sell intellectual property, such as patents, to an offshore affiliate for less than the IP cost to develop and then lease it back.

“What we find really concerning in these circumstances is where taxpayers are building up and investing in intangible generation in Australia and then transferring it to their related parties offshore for insufficient consideration,” Saint said.